A growth stock does not usually pay any dividends. The profit is held back by the company to be used as capital to foster further growth. Growth stocks are brought for their potential price appreciation. The primary requirement of a growth stock is that it must grow. So, how would you separate a growth stock from just another stock?
A growth investor is concerned about the company’s prospects and the future of the stock market. The business must possess those market attribute which will enhance its Non Profit Growth. Let us look at the non-financial characteristics of those businesses which are important market attributes. They are essential in the sense that without them, the respective company is quite unlikely to retain and sustain its leadership position.
Product must have legs to run
The product or the service of the company should cater to the present stock market. No one is interested in either bygone product or a bygone popular feature. Neither is it considered important if the current product of the company is only a passing reflection of yesteryears hottest technological revolution. The current utilization factor is the primary consideration for the market.
There was a time when people were crazy about VCRs. But today the retailers are no longer interested in the machines. A lot of video stores nowadays refuse to accept new releases on video tapes; they want their stock to be in DVD format. Those companies which are able to hold the interest of the consumers year after year have either always retained their trademark universal appeal or refreshed their product qualities conforming to the changes in the consumer requirements.
The companies with strong competitive advantages
They are also called the deep moat. It sort of protects these huge companies from their competitors. They can be the heavy manufacturers of cars and aero planes. They can also have massive recognition behind them, in the likes of McDonald or Coca Cola. It can also be a low-price leader like Wal-mart. Competitors are unable to grab the stock market share due to their superiority.
Stock market leaders always stand to set the agenda for the industry. But an investor has to ascertain whether they are the ones who are slow in leadership and are mere complacent giants. For those who rest on their past laurels eventually fade into oblivion.